You have to hand it to analysts for their stick-to-it determination when it comes to Potash Corp. of Saskatchewan Inc .: Their bullishness has been remarkably consistent even as shares in the fertilizer company have fallen 60 per cent over the past year.
Since mid-June, the shares have tumbled 26 per cent, far outpacing the 7.3 per cent decline in the S&P/TSX composite index - first on concern that the company's earnings will be lower than earlier expectations, because of declining demand; then on concern that potash prices are not holding up in international markets, after India cut a sweet deal with a Russian potash producer earlier this week.
Those moves have encouraged analysts to slash their target prices on the stock to keep up with its recent declines. But of the 10 analysts who have updated their forecasts this week, nine of them have maintained "buy" recommendations on the stock. Among these bullish analysts, the mean average target price on the shares is $125 - or about 30 per cent above its current price.
Fai Lee, an analyst at Royal Bank of Canada, lowered his price target to $100 (U.S.) from $120 (the shares trade in New York as well as Toronto) - along with his pricing assumption for potash in 2010 and his 2010 expected earnings per share for Potash Corp. . But he maintained an "outperform" recommendation on the stock.
"We believe that Potash Corp.'s shares have fully reflected the negative impact associated with the reported Indian contract price," he said in a note. "Given the potential long-term upside for potash prices, we would consider Potash Corp.'s current valuation as attractive for investors with a long-term investment horizon."
David Berman